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The Future of Loyalty

Are customer loyalty cards fading out or being forced to embrace multi-channel?

20/04/2015

The data collected from consumers has become more sophisticated than ever and has moved from “basic information” to a mixture of complex qualitative and quantitative data in the last seven years. This data can range from detailed mobile behaviour to social media content through sentiment analysis, which begs the question, will standalone customer loyalty cards fade out, or are they being forced to embrace multi-channel?

Loyalty cards were initially designed to offer rewards to regular customers and encourage habitual shopping behaviour. The use of loyalty cards are invaluable to organisations, so much so that Tesco subsequently brought a 53% stake in Dunnhumby in 2001. Tesco's then-Chairman Lord MacLaurin even said "…what scares me about this is that you know more about my customers after three months than I know after 30 years."

The expectations of the current generation of shoppers has changed considerably since the rise of mobile and multi-channel devices. As a result, store cards have become more sophisticated, although some argue that the rewards to us, the consumer have become less valuable. One-third of consumers agree that they would not be loyal to the brand if it were not for a loyalty program, and 70 percent of consumers modify when and where they shop to maximise their points.

Sainsbury’s has recently announced that they are halving the reward points available on their loyalty cards. John Lewis has also dropped the free cake and tea offer for loyalty-scheme members’ just months after it had been launched. Morrisons, on the other hand, has recently started rewarding its shoppers, with the launch of its card last October. Some are expecting a rebirth of loyalty cards as opposed to a so called “death” with a move away from plastic cards to a digital format with some entertainment value.

Customer engagement is threatened when different channels give different messages about price, availability and product information. That is why it is more important than ever to provide a fully integrated loyalty scheme programme to consumers. Subway for example, are Europe’s first fully mobile enabled Quick Service Restaurant (QSR) with 1.5 million registered users on their app. Their loyalty programme includes a SUBCARD mobile app that allows customers to monitor their loyalty, use free O2 wifi and provide instant customer feedback but also have a card version.

However, it is important to note that registered users and active users vary as consumers tend to download and remove applications. According to a Bond report 48% of loyalty program members said they would like to interact with an app on their mobile device but just 12% of them have downloaded a loyalty program app. They also discovered that consumers are yet to adopt to mobile loyalty apps to the same extent that they were taken to loyalty cards.

Loyalty cards are not dying out and are most certainly becoming multi-channel with some companies moving faster than others. The future lies in aggregating data to generate benefits to the end consumer. However, there are now more convenient ways of doing this, ways that companies need to take into consideration to keep ahead of today’s shoppers.

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